Reference no: EM132465932

Revenue and costs for Gravity Petroleum for the year 2019 are presented below:

Revenue                                          $ 600,000

G&G costs.                                        600,000

Acquisition costs                              2,000,000

Exploratory dry holes.                       4,000,000

Successful exploratory wells.             3,000,000

Development wells, dry                    1,000,000

Development wells, successful            800,000

Production facilities                          700,000

Production costs.                           100,000

  Cost                                           Successful Efforts                    Full

Amortization for 2019                       $200,000                 $ 400,000

Accumulated DD&A.                 500,000                      700,000

REQUIRED:

Question 1: Prepare income statements and unclassified balance sheets for a successful efforts (SE) company and a full cost (FC) company and explain the difference in net income.